Gabe Stallman, CEO and founder of Happy Cooking Hospitality, joins Yahoo Finance Live to discuss dining withdrawals and labor shortages due to Omicron, the need for government support and stimulus for the struggling restaurant industry, and the personal risks owners are taking.
Alexis Christophers: American restaurants are struggling as the pandemic continues. In fact, a new survey by the Alliance of Independent Restaurants found that of nearly 1,200 companies, 42% said they were at risk of bankruptcy without federal assistance. With more on that, we’re joined by Gabriel Stallman, CEO and founder of Happy Cooking Hospitality. This is a group of restaurants based in the West Village of Manhattan. Danny Romero of Yahoo Finance also joined.
So thank you very much Gabriel for being here. I know your group has four restaurants. Now that winter is here, dining al fresco isn’t much of an option here in New York City, so what do you see in terms of the demand for eating out?
Gabe Stallman: Well, for starters, Alexis, thanks a lot for having me. Thank you for shedding some light on this very important topic. WHAT WE ARE – To directly answer your question, what we are noticing now and I would say over the past four weeks is a massive slowdown in eating. We see this for several different reasons.
We see this as a direct relationship with Omicron. We are witnessing this because some of our vaccinated and boosted employees are still infected with the virus. We have to get into situations where there are not enough employees to open restaurants. We’re seeing a slowdown – and so that could lead to a slowdown.
We see it as a result of diners canceling parties, canceling plans for New Year’s bookings, and canceling vacation plans. Slowing down in interest at dinner. And then, just as I pointed out, as the temperatures cooled down and there were plenty of diners who were more comfortable eating out, that option was also removed away. So we’re seeing a massive decline as a result of this pandemic and its continuation, unfortunately.
Danny Romero: And Gabe, you know, Danny is here. Restaurants have done a lot to really adapt. It sort of highlighted this, from eating out only to eating al fresco. But I think, how much money can the restaurant industry really take, especially given the conditions we’re in right now?
Gabe Stallman: Not much more. You know, and I don’t think this is unique to the restaurant industry. I mean, we look at what’s going on in hospitals and nurses and medical professionals. And you look at what’s happening in transportation, you know, all trucking. People are tired.
I don’t think this is a question of keeping looking at restaurants and asking us to keep pivoting and innovating. We’ve done that and we’ve shown some of the most amazing courage, fortitude and tenacity of most industries in this country during this pandemic.
There’s not much we can do, is there? What we need is that we need government support. We need the government to replenish the Restaurant Revitalization Fund. We want them to deliver on what has been, thus far, an empty promise.
More than 200,000 restaurants that initially applied to RRF were left without it. This is 2/3 of the applicants. Thus, basically, through the way the government has fumbled the rapid reaction force thus far, it has created a situation of winners and losers. And those with the financial support that the RRF was supposed to provide are in a safer position to pay rent records, keep their employees employed during a meal slowdown, and not have to lay off workers, to be able to continue offering competitive wages. And those who don’t, the 2/3 who don’t, are left behind and are at risk of closure. And when we’re in danger of being shut down, that has a massive domino effect, doesn’t it? Sorry to interrupt. Please continue.
– No, I was just going to say, you know, I think it’s also important to point out at least in the reports I gave when I talked to the restaurateurs, that they’re really trying their best to keep the business open because they know they have a responsibility to their employees and to their families as well. So some of these owners not only affect their own business, but it also affects their personal finances, right? Some declared bankruptcy, and many took on additional debts.
Gabe Stallman: You’re absolutely right. And I like the way you phrased it, in fact, how you said that many restaurant owners feel a responsibility to our teams. I hope our government will feel the same sense of responsibility to us as businesses and citizens and the impact that this has on this economy. It would be great to feel the responsibility that is sent to us and that we give to our teams.
You’re absolutely right. I mean, people who don’t have an RRF take personal loans. They literally receive new investors and describe themselves from their own business. They are reducing and canceling services. Because if you can’t get enough healthy employees or you don’t have enough food, we get rid of breakfast and lunch services and just go towards dinner service, which leads to lower revenue.
The more we reduce revenue, the less we buy. We buy less drinks. We buy less coffee. We buy less dairy, fruit, fish and meat. And when we buy less, then third-party distribution companies, they have less work to do. Then they lay off people. Hence the farmers who buy from them sell less produce.
The deflationary impact of the shrinking number of restaurants extends beyond waiters, bartenders, and chefs. And there’s this blind spot that I don’t think realize about how restaurants generally return $0.90 of every dollar to the economy somehow. And so when you give us an RRF, it actually goes to everyone else one way or the other.
Danny Romero: And Gabi, let’s just say the Restaurant Revitalization Fund has been revamped, shall we? What do you expect, what changes should happen? Because according to reports, there seemed to be mismanagement about how and who got the money first, right? So what do you expect this time? Can you finish it real fast?
Gabe Stallman: Yeah, I mean, just very fundamentally, I just think that roughly 200,000 applications that were in the portal before they expire should be funded at the same pro-rata rate as everyone else. It creates some quality and poise. It allows us all to offer people competitive wages. It allows us all to survive this downturn.
The truth is that we are still in a crisis. not finished yet. people at home. People get sick. Staff wear masks. We require proof of vaccination.
These are not signs that this thing is over. So – we just need to do good with everyone else and realize that restaurants’ impact on the economy as a whole is much greater than our immediate steps.